* U.S. crude inventories fall more than expected -EIA
* Iraq, Algeria favor OPEC cut extension -minister
* Libya production hits 800,000 bpd -National Oil Corp
(New throughout, updates prices and market activity to
By David Gaffen
NEW YORK, May 10 Oil prices rose more than 3
percent on Wednesday, bolstered by the biggest one-week drop in
U.S. inventories so far this year, and after Iraq and Algeria
joined Saudi Arabia in supporting an extension to OPEC supply
Some analysts questioned the staying power of the sharp
price rebound, given increased crude production in the United
States, along with OPEC members Libya and Nigeria.
The U.S. Energy Information Administration said crude
inventories fell 5.2 million barrels last week, much more than
the 1.8 million-barrel drop analysts predicted.
Gasoline and distillate stocks also fell, supporting a
market that has sold off in recent weeks due to persistently
high U.S. inventories.
Production rose, however, and gasoline demand over the last
four weeks was 2.5 percent lower than at the same time period a
Global benchmark Brent crude settled up $1.49 a
barrel, or 3 percent, to $50.22 a barrel. U.S. light crude
oil ended up $1.45 higher at $47.33 a barrel.
"U.S. crude oil production is now solidly above 9.3 million
barrels per day with more to come, and refined product,
especially for gasoline, is oddly weak," said John Kilduff,
partner at hedge fund Again Capital in New York.
"It is difficult to see how the day's gains last."
Prices surged after the Organization of the Petroleum
Exporting Countries agreed in November with some other producing
countries to curb supply. But oil slumped in recent weeks as
rising U.S. production undermined the OPEC-led efforts to reduce
a global crude glut.
Also supporting prices were comments from Algeria's energy
minister that Algeria and Iraq favor extending global supply
cuts when OPEC meets this month.
On Monday, Saudi Arabia's oil minister Khalid al-Falih said
he expected the output deal to be extended to the end of the
year or possibly longer.
State-owned Saudi Aramco will reduce oil supplies to Asian
customers by about 7 million barrels in June. Aramco had
previously maintained supplies to important Asian
Shipments data has shown signs of drawdown, with shipments
from OPEC countries expected to fall about 50 million barrels in
April, according to Thomson Reuters. Floating storage has
started to decline in places like Singapore.
"The reason why the bears have been able to control this
market is we haven't seen the hard evidence; there are a lot of
doubting Thomases that say there's been no drawdown," said Phil
Flynn, analyst at Price Futures Group in Chicago.
OPEC member Libya said production exceeded 800,000 barrels
per day (bpd) for the first time since 2014 and could rise to
1.2 million bpd later this year.
Nigeria, which along with Libya is exempt from OPEC cuts, is
also expected to see a jump in output soon.
(Additional reporting by Aaron Sheldrick in Tokyo; Editing by
Chris Reese and David Gregorio)